Looking to improve your trading results? Check out the Traits of Successful Traders series for insight into risk management and developing a trading plan.

The turnaround in the US Dollar is getting a lot of attention in the wake of Fed Chair Jerome Powell’s testimony to the House Financial Services Committee. Accordingly, traders have been giving a nod to EUR/USD for the change in direction. Yet given USD/JPY’s ongoing losses, there is a strong argument to be made that EUR/JPY may be more vulnerable to losses than its USD-pair counterpart. The same can be said for GBP/JPY with respect to GBP/USD.

The fact is, even in this rising rate environment, a drop in risk appetite – when global equity markets fall – has tended to favor the Japanese Yen over the US Dollar. Recent BOJ commentary regarding more easing (implicitly to combat Yen strength) has fallen on deaf ears; it will take more than verbal jousting to convince market participants that this risk unwind favoring the Yen is unsustainable.

Position: Short EUR/JPY

Entry: Sell rallies into 131.15

Stop: 131.90 (trailing above daily 13-EMA).

Target 1: 129.40 (September swing low)

Target 2: 127.60 (August swing low)

Timeframe: Several days to a few weeks

Chart 1: EUR/JPY Daily Timeframe (August 2017 to February 2018)

Analyst Pick: Short EUR/JPY & Short GBP/JPY

Position: Short GBP/JPY

Entry: Sell below 146.95

Stop: 150.25 (trailing above daily 21-EMA).

Target 1: 139.30 (June and August 2017 swing lows)

Timeframe: Several weeks

Chart 2: GBP/JPY Daily Timeframe (May2017 to February 2018)

Analyst Pick: Short EUR/JPY & Short GBP/JPY

Read more: US Dollar Bottoming Effort Takes a Step Forward

--- Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher's e-mail distribution list, please fill out this form